2008 (3) TMI 33 - AT - Service Tax

The main activity of the appellants was Data Processing from accounting work to generating MIS reports related to consumers and develop the software for this purpose. During the relevant period Information Technology Service has been excluded from the scope of Business Auxiliary Service. Held that computerized data processing also falls within the scope of Information Technology Service and not liable to tax under BAS

Summary

Issues Involved:
Interpretation of services rendered by appellants under "Business Auxiliary Service" and "Information Technology Service" categories.

Analysis:
1. Services Rendered and Tax Liability:
The judgment pertains to three appellants providing services to the Andhra Pradesh State Electricity Board, where the lower authority imposed service tax and penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The core issue revolved around whether the services provided fell under "Business Auxiliary Service" or "Information Technology Service."

2. Argument of the Advocate:
The learned Advocate representing the appellants argued that based on the contract with the APSEB, the primary activity was Data Processing, which should be categorized under "Information Technology Service." He highlighted that during the relevant period, "Information Technology Service" excluded "Business Auxiliary Service," and computerized data processing was considered part of "Information Technology Service." The Advocate cited a previous decision by the Bench in Bellary Computers Vs. CCE (Appeals), Mangalore to support this argument.

3. Departmental Representative's Argument:
Contrary to the Advocate's stance, the Departmental Representative contended that the appellants were merely using computers for various services, including account maintenance, which did not automatically qualify as "Information Technology Service." The Representative referenced the Commissioner (Appeals) order but noted a crucial omission in defining Information Technology Service.

4. Contractual Scope of Services:
The judgment examined specific clauses from the contract between the appellants and APSEB to understand the nature of services provided. The contract outlined tasks such as data uploading, validation, report generation, and software development for MIS reports. These tasks indicated a significant involvement in data processing and software development, aligning with Information Technology Services.

5. Conclusion and Relief Granted:
After analyzing the contract terms and the services rendered, the judgment concluded that the appellants' activities fell within the realm of Information Technology Services, excluding them from Business Auxiliary Service. Consequently, the appeals were allowed, providing the appellants with consequential relief from the imposed tax and penalties.

In summary, the judgment clarified the distinction between Business Auxiliary Service and Information Technology Service based on the nature of services provided by the appellants to the APSEB, ultimately granting relief by categorizing the services under Information Technology Service.